Numbed by the pandemic, fund-raising by start-ups fell 35.9 per cent in 2020, but riding on a rise in adoption of digitisation and new technologies, this year is expected to be much better. The industry expects the sector to be on fire again, with a 50 per cent increase in fund raising in 2021 from last year and a 25 per cent rise from 2019.
“In 2020, fund-raising happened only during the first three and the last three months of the year. While markets grew due to rising adoption of digitisation, this year, we are expecting a whole lot of Initial Public Offerings (IPOs). Looking at the trend for three years — 2017, 2018 and 2019 — the rise in funsd-raising was about 25 per cent, and this year, it should be on similar lines,” said Rehan Yar Khan, managing partner at Orios Venture Partners.
“Over 2020, which was a washout year, we expect a 50 per cent rise,” he added.
In 2020, the start-ups raised $10,391.51 million in funding through 1,352 rounds, much lower than the $16,212 million raised through 1,744 rounds in 2019, according to data collated by consultancy firm Tracxn.
“This year, different sectors will behave differently. Some of the sectors that will gain momentum are healthcare and education, whereas certain other categories such as mobility and lending would be fairly challenged,” said Alok Mittal, CEO and Founder of fintech platform Indifi Technologies.
“I think the pre-seed investments will continue to gather momentum; there will some pressure in Series B and Series C funding, while companies will find it hard to raise second or third rounds. Overall, I would expect seed and Series A to grow. It will be better than 2020, though it could be slower or at par with 2019,” Mittal, who is also an active angel investor and co-founder of Indian Angel Network, said.
As per a Nasscom report, India added 1,600 new tech start-ups and a record 12 unicorns (market value of over $1 billion) in 2020, and is on track to have a 50-plus strong unicorn club in 2021.
‘Important and urgent’
“In 2020, fintech, online learning, online deliveries and online payment gained traction. In 2019, people used to say that digital transactions were important but not urgent, but now with remote working gaining ground, it’s important to move over to new technologies and invest in promising start-ups. Now digitalisation has become both important and urgent,” said Bhakti Vithalani, CEO of skilling platform BigSpring.
“Last year also a lot companies raised funds, and they are accountable to deploy it. Investors are finding a lot of great opportunities, great founders and great companies and to invest in, which, to my mind, is not an indication of slowing down,” she added.
Initiatives such as ‘Startup India Seed Fund’ will also help the sector raise seed money.